FY2013 - FY2017 Capital Investment PlanReport -Introduction

The Commonwealth is responsible for maintaining a large inventory
of capital assets, including transportation infrastructure, courts,
correctional facilities, state hospitals, office buildings, parks and more. In
addition, the Commonwealth makes targeted capital investments to support
economic growth, strengthen communities and improve the quality of life in the
Commonwealth. These investments include funding for public infrastructure to
support private development and job growth, local infrastructure improvements
and protection of our natural resources.

These capital investments
are planned and funded through the Commonwealth’s capital budget, which is
separate and distinct from the annual operating budget. The capital budget is
primarily funded by borrowing through the issuance of bonds. There are certain
other sources of funding for the capital budget, the largest of which is
federal funds, primarily to reimburse transportation infrastructure
improvements. From fiscal year 2009 through 2012, the American Recovery and
Reinvestment Act of 2009 (“ARRA”) provided additional federal funds which
targeted to specific capital purposes.

The issuance of bonds to
fund the capital budget must be authorized by the Legislature. Pursuant to
these legislative authorizations to borrow, the Governor determines the amount
and timing of any authorized borrowing to fund capital investments. At the
request of the Governor, the State Treasurer issues the bonds to borrow the
funds. The Governor approves the use of the borrowed funds by agencies to pay
for authorized and budgeted capital projects.

The primary factor
constraining the amount of the Commonwealth’s capital budget is affordability.
The Commonwealth must pay principal and interest costs each year on the bonds
it issues to fund its capital investment program. These annual debt service
expenses on outstanding Commonwealth bonds are funded each year in the
Commonwealth’s annual operating budget. The Patrick-Murray Administration is
the first to develop and publish an analysis of the amount of debt the state
can afford in terms of its impact on debt service and the operating budget, and
it is the first to develop a policy for determining the annual borrowing amount
to fund the capital budget. This debt affordability analysis and policy, as
updated to reflect current market and economic conditions, is included as
Appendix A.

There are certain capital investments that are not funded by the
Commonwealth through its capital budget and consequently are not reflected in
this capital investment plan. There are a number of independent state
authorities responsible for maintaining certain public infrastructure from
revenues generated from those infrastructure assets or from dedicated state tax
or other revenues that are not available to the Commonwealth for general
budgeting purposes. Examples of these entities include the Massachusetts Bay
Transit Authority, the Massachusetts Housing Finance Authority and the
Massachusetts School Building Authority. Because these entities carry out
their own capital projects and are solely responsible for financing them from
their own funding sources, the capital investments made by these entities are
not included in the state’s capital investment plan. In addition, certain equipment
purchases and information technology projects funded by state agencies through
their operating budgets are not reflected in the capital investment plan.